Unit 2 SAPM Final - Merged

MBA 3rd Sem.
Unit-2 Security Analysis and portfolio Management (SAPM)
LECTURE NO: - 9
INTRODUCTION TO INDIAN FINANCIAL MARKET
What are Financial Markets?
Any location or system that allows buyers and sellers to trade financial assets such as
bonds, shares, international currencies, and derivatives is referred to as a financial
market. Financial markets make it easier for individuals who need money to get it and
those who want to invest it. Any market where securities can be bought and sold is
referred to as a financial market. The stock market, bond market, and commodities
market are all examples of Financial Markets.
The Structure of the Financial Markets in India and the Indian Finance System
In India, there exists broadly two types of Financial Markets which are further classified:
Money Market is a market that deals with short-term funds. The capital market is a
market that deals with long-sighted funds. Lenders and borrowers can trade funds
Dr. Pramod Gupta, Professor-MBA Department-MITRC 33

MBA 3rd Sem. Unit-2 Security Analysis and portfolio Management (SAPM)
through the financial system. In the areas of insurance, banking, capital markets, and
numerous services, India’s financial system is governed by independent authorities.
What is the International Finance System?
The study of monetary interactions between two or more countries is known as

international finance. Foreign direct investment and currency exchange rates are among
the topics covered by international finance. The relevance of international finance has
grown as a result of increased globalization. The article lists some of the most prevalent
kinds of international finance via overseas investing. Mutual funds, American depository
receipts, and exchange-traded funds are examples of these. The legal grounds for being
familiar with applicable law, cost factors, scam information, and more are also listed.
What are the Types of Financial Markets in India?
1.Markets for Bonds: -
A bond is a financial instrument whereby an investor lends money for a set length of time
at a fixed interest rate. A bond can be thought of as a contract between the creditor and
debtor that describes the debt and its instalments. Bonds are issued to fund projects and
operations by firms, communities, regions, and sovereign nations. The bond market, for
example, sells assets issued by the US Treasury, including such notes and bills. Bonds are
sometimes known as debit, credits, or fixed-income securities.

2.Markets for Money: -
Money markets typically trade in liquidity short-term bonds (less than 12 months ) and
are characterized by a high level of safety and a low rate of interest return. Money markets
feature large-volume trading between organizations and dealers at the wholesale level. It
consists of money market mutual funds purchased by private investment and money
market opened by account holders at the retail level. Individuals can participate in the
money markets by purchasing short-term certificates of deposit (CDs), municipal bonds,
or US Treasury bills, among other options.
3.Derivatives Markets: -
A subordinate is a contract between at least two parties whose value is determined by a

concealed monetary resource (such as a security) or collection of resources (like a list).
Subordinates are optional protections whose value is solely determined by the value of
the essential security to which they are linked. All by itself, a subsidiary is useless. Rather
than exchanging stocks straightforwardly, a subsidiaries market exchanges prospects and
choices contracts, and other progressed monetary items, that get their worth from
fundamental instruments like securities, products, monetary forms, loan fees, market
files, and stocks.
4.Stock Exchange: -
The stock market is where you can buy and sell shares in public corporations. Each share
has a value, and investors profit from the stocks if they outperform the market. Purchasing
stocks is simple. The main issue is determining which stocks will generate profit for the
investor.
5.Foreign Exchange Market or Forex Market: -
This is the place where the monetary standards are traded and there are dealers,
arbitrageurs, examiners, and hedgers in these business sectors. Universally, the forex
exchanging market is the biggest contrast with other resource classes. The development
of global exchange made it important to have the option to decide the overall worth of
monetary standards given the distinctions in their buying power. The requirement for
trading one money to one more for settling exchanges labour and products achieved
unfamiliar trade hazards and that made a strong forex market. India has had the rupee
forward market presented by banks for quite a while, however, that is presented by banks

just against genuine openness. Today, it is feasible to likewise exchange cash sets in the
money subordinates’ fragment of the stock trade. The USDINR pair is, obviously, the most
popular and extensively traded currency pair.
What are Financial Instruments in India? :-
Cash instruments and derivative instruments are two types of financial instruments.
A. Instruments of Cash: -
The value of cash instruments is established directly by the marketplace. Securities, which
are easily transferable, as well as loans and deposits, where both the borrower and the
lender must agree on a transfer.
B. Instruments that are derivatives: -
Derivative instruments are assets, indexes, and interest rates that derive their worth from
the value and attributes of one or more underlying entities. Exchange-traded derivatives
(ETDs) and over-the-counter (OTC) derivatives are two types of derivatives.
Some examples of Financial Instruments in India are:
• Money Market Funds (also known as liquid funds)
• Bank Fixed Deposit (Bank FDs)
• Post Office Savings Schemes (POSS)
• Public Provident Fund (PPF)
• Company Fixed Deposits (FDs)
• Bonds and Debentures
• Mutual Funds
References: -
• Security Analysis and Portfolio Management, Vikas Publishing House.
• https://www.thebalance.com/securities-definition-and-effect-on-the-us-economy-
3305961

LECTURE NO: - 10
ORGANIZATION AND FUNCTIONING OF SECURITIES MARKET
Introduction to Securities Market

The securities markets provide a regulated framework for efficient flow of capital (equity
and debt) from investors to business in the financial market system. Securities markets
are basically a platform for allocation of savings to investments. Like any market, the
securities market is also a place where buyers and sellers get together; the only difference
being that the securities market also contributes to capital formation, apart from
providing liquidity and price discovery. Due to the power of securities markets, the savings
of households, business firms and government can be channelized to fund the capital
requirements of a business enterprise.

Key Characteristics of Securities: -

Before we understand what are securities markets let us first understand what a Security
is? A security could be a share / bond or any other financial instrument that has value or
is linked to an underlying instrument that has value. According to the Securities Contracts
Regulation Act (SCRA), a security is one that is exchange tradable. Here are some key
features of securities; as applicable to financial markets.
• Securities represent the terms of exchange of money between two parties; the buyer
and the seller in this case.
• Securities can be issued by borrowers / equity funders to raise money at a reasonable

cost and gives security ownership to investors.
• Businesses issue securities to raise money from investor with surplus funds through a
regulated contract and a regulated and monitored mechanism.
• While the issuer of the security provides the terms for raising capital, investors have
a claim to the rights represented by the securities.
• Securities can be broadly classified into equity (risk participation) or debt (claim on
cash flows).
• While debt securities are issued for a specific period, equity securities are perpetual.
Debt securities pay interest while equity pays out dividends, but it is not assured.
Security Markets: Structure and Participants

Securities market can be broken up into three broad segments, although both are very
closely inter-related.
• Primary market refers to the segment of the market where the securities are issued
by companies either as a new issue or as an offer for sale. Both equity and debt
securities have a primary market where they are first issued.
• Secondary markets are where the actual trading of these securities takes place.
Primary issues of debt and equity eventually get traded in the secondary market for
price discovery. The secondary market is the normal trading market.
• Derivatives market deals in futures and options. Unlike equities that signify
ownership, derivatives are just contracts and are used to manage the risk underlying
in the security. Traders can also trade in derivative contracts.
Let us now turn to the key participants in the securities market

Investors are individuals or institutions with surplus funds which are used to purchase
securities. The objective of investors is to convert savings into financial investments. Such
investors can be retail or institutional.
Issuers are the businesses or fund raisers looking to raise money by issuing securities.
They issue securities for short-term and long-term capital needs of the business. Issuers
include companies, governments, financial institutions, PSUs, mutual funds etc.
Other than the issuers and the investors who are the essential participants, there are a
number of intermediaries who make the smooth functioning of securities market
possible.
Key Intermediaries in the Securities Market: -

Intermediaries, as the name suggests, are agents coordinating between investors and
issuers. SEBI (Intermediaries) Regulations, 2008, classifies intermediaries as follows.
• AMCs / Portfolio Managers manage a portfolio of securities and offer units that
represent participation in a pool of money. They help investors diversify risk and build
wealth.
• Investment bankers or lead managers manage IPOs, rights issues, debt raising, raising
of FDs, and placement with institutions, syndication and give corporate advisory
services too.
• Underwriters guarantee the sale of an IPO and give comfort to issuers by undertaking
to take up shares that don’t get sold. They are paid an underwriting fee for this service.
• Brokers are registered trading members of stock exchanges and they execute
transactions in the secondary market. They also market IPOs and also give appropriate
advice to clients.
• Sub-brokers / Franchisees are affiliated to brokers and help the brokers to reach out to
a larger network of investors in specific geographies.
• Clearing members are members of the stock exchange who are responsible for the
clearing and settlement of trades on a daily basis on the stock exchange.
• Bankers to an issue are appointed during IPOs, to collect application forms and monies
from investors and coordinate with lead managers and facilitate transfer of funds.

• Registrars & Transfer Agents (RTAs) maintain the record of investors on behalf of the
issuer. They manage allotment of IPOs, effect transfer of ownership and execute
corporate actions.
• Depository Participants (DPs) are the link between the depository (NSDL/CDSL) and the
investors. They hold the shares of investors in custody in electronic form.
• Custodians are to institutional investors what the DP is to retail investors. Custodians

manage transactions pertaining to delivery of securities and money after a trade is
made through the broker, and also provides accounting for securities and money.
• Trustees are appointed when beneficiaries may not be able to directly supervise if
money invested is being managed properly. Mutual funds and debentures have
trustees.
• Credit rating agencies rate a debt security based on the ability of the company to service
its interest and principal obligations on time. Ratings are periodically reviewed.
• Investment advisers help investors to make an informed choice of securities in a manner

that is in sync with their long term goals.
Regulatory Framework For The Securities Market

Regulation of the capital markets happens at multiple levels. There is a regulation by the
nodal regulator, Securities, and Exchange Board of India (SEBI). Additionally, the securities
markets are also regulated by the RBI, Department of Economic Affairs (DEA) of the
Ministry of Finance and Ministry of Corporate Affairs (MCA). In addition, the stock
exchanges and the depositories also exercise first level regulation of the securities market,
apart from SEBI.
• Securities and Exchange Board of India (SEBI) is the principal regulator of the securities
market and has 3 principal objectives viz. facilitating the growth of capital markets,
protecting the interests of small investors and maintaining the integrity of markets.
• Reserve Bank of India (RBI) regulates the money market segment of the securities
market. As the manager of the government’s borrowing program, RBI is the issue
manager for government debt. Exchange-traded currency futures also come under RBI
purview.
• Ministry of Corporate Affairs (MCA) regulates the functioning of the corporate sector.
It covers setting up of companies, functioning, audit and control. The issuance of
securities is also subject to the provisions of the Companies Act 2013.
• Ministry of Finance (MOF) regulates markets through the Department of Economic

Affairs. It broadly regulates capital markets and its participants and also initiates
discussions on reforms and overseas the implementation of various governing acts.
Detailed Functions of SEBI: -

While SEBI broadly works to develop the market and to protect investor interest, its
specific functions, inter alia, include the following.
• SEBI regulates the functioning of the stock exchanges and provides for direct or
indirect control of all aspects of securities trading and functioning of stock
exchanges. Stock exchanges are also required to send daily monitoring reports.
• SEBI has codified regulations that cover all activities and intermediaries in the
securities markets, which includes brokers, sub brokers, investment bankers,
depositories, depository participants, custodians, trustees, registrars etc.
• It oversees functioning of primary (IPO) markets. This includes general conditions

for public and rights issuances, Institutional Placement Programme (IPP), Qualified
Institutions Placement (QIP) etc; eligibility requirements, general obligations etc.
• Inspections of the intermediaries to ensure compliance with prescribed standards.

SEBI can also order investigations into operations of any constituent of the securities
market to prevent price manipulation, circular trading, insider trading, unfair
practices etc.
Major Functions of The Securities Market: -

Securities markets are a barometer of the health and robustness of the economy and the
investment scenario in the economy. Here are some of the key functions that securities
markets perform.
• They enable efficient allocation of financial capital. By bringing investors, savers and
issuers together, the securities market channel funds from those who are willing to
take risk for the sake of returns to businesses that need capital to grow.
• Securities markets channelize the widespread and diverse savings of millions of small
investors into long term wealth creation. Thus savings are productively employed
enabling small investors to also participate in economic growth.

• An important function of securities market is that they provide liquidity to stocks and
bonds that would have otherwise been illiquid. The availability of a liquid securities
market also encourages investors and issuers to participate with greater confidence.
• Securities markets are an important platform for price discovery. Pricing of equities is
lot more complex and securities markets manage to combine the wisdom of analysts,
traders, investors and arbitrageurs to discover the real worth of an asset.
Securities Types and Characteristics: -

There are two broad types of securities that are issued by seekers of capital from
investors:
• Equity
• Debt
While equity represents risk capital, debt represents more of an assured capital with
lesser degree of risk. Equity capital has nothing like assured returns. Dividends are only
paid out of profits and if the company performs well consistently then it also results in
capital appreciation. Debt entails regular payment of interest as well as repayment of
principal at the end of the tenure of the bond / debenture. Equity investors are the owners
of the company while the debt investors are the creditors of the business. Equity investors
can also participate in the management of the company and voting on resolutions.
References: -
• Prasannachandra, Investment analysis and Portfolio Management, Tata McGraw Hill,
2008.
• V. A. Avadhani, Securities Analysis and Portfolio Management, Himalaya Publishing
House, 2008
• Security Analysis and Portfolio Management, Vikas Publishing House

LECTURE NO: - 11
TYPES OF MARKET, STOCK INDICES
What is Share Market?
The share market is a platform where buyers and sellers come together to trade on
publicly listed shares during specific hours of the day. People often use the terms ‘share
market’ and ‘stock market’ interchangeably. However, the key difference between the
two lies in the fact that while the former is used to trade only shares, the latter allows you
to trade various financial securities such as bonds, derivatives, forex etc.
The principal stock exchanges in India are the National Stock Exchange (NSE) and the
Bombay Stock Exchange (BSE).
Types of Share Markets: -
Stock markets can be further classified into two parts: primary markets and secondary
markets.
• Primary Share Markets

When a company registers itself for the first time at the stock exchange to raise funds
through shares, it enters the primary market. This is called an Initial Public Offering (IPO),
after which the company becomes publicly registered and its shares can be traded within
market participants.
• Secondary Market
Once a company’s new securities have been sold in the primary market, they are then
traded on the secondary stock market. Here, investors get the opportunity to buy and sell
the shares among themselves at the prevailing market prices. Typically investors conduct
these transactions through a broker or other such intermediary who can facilitate this
process.
What Is Traded on The Share Market?

There are four categories of financial instruments that are traded on the stock exchange.
These include:

1. Shares
A share represents a unit of equity ownership in a company. Shareholders are entitled to
any profits that the company may earn in the form of dividends. They are also the bearers
of any losses that the company may face.
2. Bonds
To undertake long term and profitable projects, a company requires substantial capital.
One way to raise capital is to issue bonds to the public. These bonds represent a “loan”
taken by the company. The bondholders become the creditors of the company and
receive timely interest payments in the form of coupons. From the perspective of the
bondholders, these bonds act as fixed income instruments, where they receive interest
on their investment as well as their invested amount at the end of the prescribed period.
3. Mutual Funds
Mutual funds are professionally managed funds that pool the money of numerous
investors and invest the collective capital into various financial securities. You can find
mutual funds for a variety of financial instruments like equity, debt, or hybrid funds, to
name a few.
4. Derivatives
A derivative is a security that derives its value from an underlying security. This can have
a wide variety such as shares, bonds, currency, commodities and more! The buyers and
sellers of derivatives have opposing expectations of the price of an asset, and hence, enter
into a “betting contract” with regards to its future price.

What Is Stock Market Index/Indices? -
Stock market indices represent a certain group of shares selected based on particular
criteria like trading frequency, share size, etc. The stock market uses the sampling
technique to represent the market direction and change through an index.
To help you understand this concept further, let’s begin with the most basic question,
what is a stock market index?
Stock Market Index Meaning: -
A stock market index is a statistical tool that reflects the changes in the financial markets.
The indices are indicators that reflect the performance of a certain segment of the market
or the market as a whole.
A stock market index is created by selecting certain stocks of similar companies or those
that meet a set of predetermined criteria. These shares are already listed and traded on
the exchange. Share market indices can be created based on a variety of selection criteria,
such as industry, segment, or market capitalization, among others.
What Are the Types of Stock Market Indices?
There are different types of stock market indices based on the kind of stocks taken into
account to create the index. Here’s a closer look at some of the most common types of
indices:
• Benchmark indices such as BSE Sensex and NSE Nifty

• Broader indices such as Nifty 50 and BSE 100
• Indices created based on the market capitalization of companies, such as BSE Midcap
and BSE Smallcap
• Sector-specific indices like Nifty FMCG, Nifty Bank Index, CNX IT, and S&P BSE Oil and
Gas
A Closer Look At The Two Benchmark Indices In The Indian Stock Market
India’s stock markets have two benchmark indices - BSE Sensex and NSE Nifty.
S&P BSE Sensex:

Sensex is a blend of the words sensitive and index. It was introduced in 1986 and is the
oldest in India. The BSE Sensex consists of the top 30 largest and most frequently traded
stocks listed in the Bombay Stock Exchange (BSE).

CNX NIFTY (NIFTY 50):

Also known as the NSE Nifty, this share market index consists of the top 50 largest and
most frequently traded stocks within the NSE. First created in 1996, NSE NIFTY is owned
and maintained by India Index Services & Products Limited (IISL), which is a joint-venture
organization between an Indian credit rating agency CRISIL and the National Stock
Exchange. The CNX portion in the CNX NIFTY stands for CRISIL and NSE.
Why Are Stock Market Indices Required?
The performance of market indices acts as a nearly accurate indicator of the state of the
markets and reflects the general sentiments of investors. These indices also provide
investors with a wealth of information that helps them create and implement investment
strategies.
1.Provide Important Information for Benchmarking:

Many traders, investors and other market participants use the performance of the indices
as a benchmark for analyzing their investments in the stock market. For instance, you can
use the performance of NIFTY over a given period to compare it with the actual
performance of the stocks in your investment portfolio during that period.
2.Help Minimize Your Exposure to Risk:

One way to outperform the market is by investing in index funds. The risk of
underperformance is low in index funds because they contain stocks from several sectors
and industries, thereby essentially diversifying your investment portfolio. When you
invest in specific stocks, your corpus might be eroded if those stocks don’t perform well.
With stock market indices, however, your risk exposure is largely reduced.
3.Help Passive Investors:

Picking the right stocks to invest in requires a great deal of research. This may be
impractical for passive investors, who are looking for avenues to invest in over the long
term without constantly monitoring their portfolio actively.
References: -
• https://www.investopedia.com/articles/stocks/09/indian-stock-market.asp.

LECTURE NO: - 12
REGULATORY ENVIRONMENT- STOCK EXCHANGE IN INDIA
Regulations in India: -
Indian Capital Markets are regulated and monitored by the Ministry of Finance, The
Securities and Exchange Board of India and The Reserve Bank of India.
The Ministry of Finance regulates through the Department of Economic Affairs - Capital
Markets Division. The division is responsible for formulating the policies related to the
orderly growth and development of the securities markets (i.e. share, debt and
derivatives) as well as protecting the interest of the investors. In particular, it is
responsible for
• institutional reforms in the securities markets,
• building regulatory and market institutions,
• strengthening investor protection mechanism, and
• providing efficient legislative framework for securities markets.
The Division administers legislations and rules made under the

• Depositories Act, 1996,
• Securities Contracts (Regulation) Act, 1956 and
• Securities and Exchange Board of India Act, 1992.
Functions of Stock Exchange: -

Following are some of the most important functions that are performed by stock
exchange:
1. Role of an Economic Barometer: Stock exchange serves as an economic barometer

that is indicative of the state of the economy. It records all the major and minor
changes in the share prices. It is rightly said to be the pulse of the economy, which
reflects the state of the economy.
2. Valuation of Securities: Stock market helps in the valuation of securities based on the
factors of supply and demand. The securities offered by companies that are profitable
and growth-oriented tend to be valued higher. Valuation of securities helps creditors,
investors and government in performing their respective functions.
3. Transactional Safety: Transactional safety is ensured as the securities that are traded
in the stock exchange are listed, and the listing of securities is done after verifying the
company’s position. All companies listed have to adhere to the rules and regulations
as laid out by the governing body.

4. Contributor to Economic Growth: Stock exchange offers a platform for trading of

securities of the various companies. This process of trading involves continuous
disinvestment and reinvestment, which offers opportunities for capital formation and
subsequently, growth of the economy.
5. Making the public aware of equity investment: Stock exchange helps in providing
information about investing in equity markets and by rolling out new issues to
encourage people to invest in securities.
6. Offers scope for speculation: By permitting healthy speculation of the traded
securities, the stock exchange ensures demand and supply of securities and liquidity.
7. Facilitates liquidity: The most important role of the stock exchange is in ensuring a
ready platform for the sale and purchase of securities. This gives investors the
confidence that the existing investments can be converted into cash, or in other
words, stock exchange offers liquidity in terms of investment.
8. Better Capital Allocation: Profit-making companies will have their shares traded
actively, and so such companies are able to raise fresh capital from the equity market.
Stock market helps in better allocation of capital for the investors so that maximum
profit can be earned.
9. Encourages investment and savings: Stock market serves as an important source of
investment in various securities which offer greater returns. Investing in the stock
market makes for a better investment option than gold and silver.
Name of the
Sr. Recognition Valid Segments
Recognized Stock Address
No. Upto Permitted
Exchange
1 BSE Ltd. P J Tower, Dalal Street, Mumbai 400001 PERMANENT a. Equity

b. Equity
Derivatives
Website: http://www.bseindia.com
c. Currency
Derivatives
(including
Interest Rate
Derivatives)
d. Commodity
Derivatives
e. Debt
2 Calcutta 7, Lyons Range, Dalhousie, Kolkata- PERMANENT -

Stock 700001, West Bengal

Name of the
No. Upto Permitted
Exchange
Exchange Website: http://www.cse-india.com/

Ltd.
3 Metropolitan 205A, 2nd Floor, Piramal Agastya Sep 15, 2023 a. Equity
Stock Corporate Park, Sunder Bung Lane, b. Equity
Exchange of Kamani Junction, LBS Road, Kurla (West) Derivatives
India Ltd. Mumbai – 400070 c. Currency
Website: http://www.msei.in/index.aspx Derivatives
(including
Interest Rate
Futures)
d. Debt
4 Multi Exchange Square, Suren Road, Chakala, PERMANENT a. Commodity

Commodity Andheri (E), Mumbai 400093 Derivatives
Exchange of Website: https://www.mcxindia.com/
India Ltd.
5 National Akruti Corporate Park,1st Floor, Near PERMANENT a. Commodity

Commodity G.E.Garden, L.B.S. Marg, Kanjurmarg Derivatives
& Derivatives (West), Mumbai 400078
Exchange Website: http://www.ncdex.com/
Ltd.
6 Indian Reliable Tech Park, 403-A, B-wing, 4th PERMANENT -

Commodity Floor, Thane-Belapur, Road, Airoli (E),
Exchange Navi Mumbai - 400708
Limited
7 National Exchange Plaza, C-1, Block G, Bandra Kurla PERMANENT a. Equity

Stock Complex, Bandra (East) Mumbai 400051 b. Equity
Exchange of Derivatives
India Ltd. c. Currency
Website: https://www.nseindia.com
Derivatives
(including
Interest Rate

Name of the
No. Upto Permitted
Exchange
Derivatives)
d. Commodity
Derivatives
e. Debt
References: -
2008.
House, 2008

LECTURE NO: - 13
BSE, NSE, ISE
India’s two main stock exchanges are the Bombay Stock Exchange (BSE) and National
Stock Exchange (NSE). These two are among Asia’s largest stock exchange surpassed only
by the stock exchanges of Japan and China.
The Bombay Stock Exchange is one of Asia’s oldest stock exchanges, beginning operations
on July 9, 1875, as “The Native Share & Stock Brokers Association”.
The National Stock Exchange is India’s biggest stock exchange in terms of market
capitalization. Its operation beginning in 1992, it was the first exchange to bring in fully
automated trading to India.
Differences between NSE and BSE
NSE BSE
It is one of the biggest stock exchanges India along The BSE is one of Asia’s oldest stock
with being a harbinger of technological advances by exchange markets which offers a
the introduction of fully automated trading systems legacy of high-speed trading
As electronic trading was incorporated from the Only in 1995 did BSE switch to
beginning of its establishment, it always has been a electronic trading after following a
fully electronic stock exchange promoting paperless paper trading pattern since 1875.
trade
In the global stock exchange rankings, NSE stands at The BSE stands at 10th position in
the 11th Position the global stock exchange rankings
The NSE has the lead in this segment as it has BSE enjoys far lower volumes
monopolized it. among investors and traders alike
The NSE has more than 1600 companies listed under The BSE has more than 5000
it companies listed under it.
NSE’s Stock Index – NIFTY – gives top 50 stock index BSE’s Stock Index – SENSEX gives
top 30 stock index

NSE was recognized as a stock exchange in 1993 BSE became a recognized stock
exchange in 1957
NSE promotes trading in equity, debts and currency BSE promotes trading in debt
derivatives instruments, mutual funds and
currencies
Mr Vikram Limaye is the Managing Director and CEO Mr Ashishkumar Chauhan the
Managing Director and CEO.
What is Cisco Identity Services Engine (Cisco ISE)?

Cisco Identity Services Engine (ISE) is a security policy management platform that provides
secure network access to end users and devices. Cisco ISE enables the creation and
enforcement of security and access policies for endpoint devices that are connected to an
organization's routers and switches. It is designed to help organizations simplify identity
management across devices and applications.
Cisco Identity Services Engine helps enterprises understand and gain visibility into their
network, giving them the ability to see who is connected as well as which applications are
installed and running. The product can help with zero-trust strategies by securing the
network and everyone and every endpoint connected to it. ISE can also share data like
user and device identities as well as threats and vulnerabilities with other integrated Cisco
tools to further streamline security policy management.
Cisco ISE is licensed on a subscription basis, but a 90-day free evaluation license can be
downloaded for up to 100 endpoints.
How does Cisco ISE work and what is it used for?

With an increased number of users and devices accessing networks remotely, protecting
an organization's data from network security breaches becomes more complex.
Administrators can use Cisco Identity Services Engine to control who has access to their
network and ensure authorized policy-compliant devices are being used. IT administrators
can use ISE for policy enforcement, visibility, granting guest access to the network, threat
containment, tool integrations, device administration and bring-your-own-device (BYOD)
management.

Top Cisco ISE features

Cisco ISE helps to protect networks from cyber-attacks using the following features:
• Access control. Provides users with access control options that include
downloadable ACLs, virtual LAN, URL redirections and security group ACLs.
• Centralized management. This enables administrators to configure, manage

and authenticate users and devices in one location.
• Cisco DNA Center integration. This network controller and management

dashboard can integrate with ISE to act as an analytics platform for networks. DNA
Center can also aid in the design, provisioning and application of policies. These
policies can then be applied to users and applications instead of network devices.
• Contextual identity and business policies. These policies include

authentication, device identity, posture validation, as well as user and endpoint
identity attributes.
• Cisco TrustSec and Group-Based Policy. This includes a segmentation

controller that manages switch, router, wireless and firewall rules.
• Device profiling. Cisco Identity Services Engine can create custom device
templates that automatically detect, classify and associate administration
identities.
• Monitoring and troubleshooting. ISE users can access a web console for
monitoring, reporting and troubleshooting.

References: -
House, 2008

LECTURE NO: - 14
OTCEL TRADING AND SETTLEMENT
What Is the Over-The-Counter Exchange of India (OTCEI)?
The Over-The-Counter Exchange of India (OTCEI) is an electronic stock exchange based

in India that consists of small- and medium-sized firms aiming to gain access to
overseas capital markets, including electronic exchanges in the U.S. such as the NASDAQ.
There is no central place of exchange, and all trading occurs through electronic networks.
KEY TAKEAWAYS
• The Over-The-Counter Exchange of India (OTCEI) is an Indian electronic stock

exchange composed of small- and mid-cap companies.
• The purpose of the OTCEI is for smaller companies to raise capital, which they cannot
do at the national exchanges due to their inability to meet the exchange
requirements.
• The OTCEI implements specific capitalization rules that make it suited for small- to
medium-sized companies while preventing larger companies from being listed.
• The key players in the OTCEI include brokers, market makers, custodians, and
transfer agents.
Understanding the Over-The-Counter Exchange of India (OTCEI): -
The OTCEI is based in Mumbai, India, and operates solely over a computer network. The
exchange is recognized by India's Securities Contract Regulation Act, meaning
all listed stocks on the OTCEI benefit equally as other listed securities on other exchanges
in India.
The exchange was established in 1990 to provide investors and companies with an
additional way to trade and issue securities. It arose primarily from small companies in
India finding it difficult to raise capital through mainstream national
stock exchanges because they could not fulfill the stringent requirements to be listed on
them.
The OTCEI has rules that are not as rigid as the national exchanges, allowing small
companies to gain access to the capital they need to grow. The objective is that once they

grow to a certain level and are able to meet the requirements to be listed on the
national stock exchanges, they will make the switch over and leave the OTCEI behind.
Features of the Over-The-Counter Exchange of India (OTCEI): -
The OTCEI has some special features that make it a unique exchange in India as well as a
growth catalyst for small- to medium-sized companies. The following are some of its
unique features:
• Stock Restrictions: Stocks that are listed on other exchanges will not be listed on
the OTCEI and, conversely, stocks listed on the OTCEI will not be listed on other
exchanges.
• Minimum Capital Requirements: The requirement for the minimum
issued equity capital is 30 lakh rupees, which is approximately $40,000.
• Large Company Restrictions: Companies with issued equity capital of more than
25 crore rupees ($3.3 million) are not allowed to be listed.
• Member Base Capital Requirement: Members must maintain a base capital of 4
lakh rupees ($5,277) to continue to be listed on the exchange.
Over-The-Counter Exchange of India (OTCEI) Listing Requirements: -
The OTCEI makes it easier for small- to mid-cap sized companies to be listed, although
there are still some requirements that companies must meet before being allowed to be
listed.
Stipulations include acquiring sponsorship from members of the OTCEI and having
two market makers. In addition, once a company is listed, it cannot be delisted for at
least three years, and a certain percentage of issued equity capital needs to be kept by
promoters for a minimum of three years. This percentage is 20%.
References: -
2008.
House, 2008.

LECTURE NO: - 15
REGULATION OF STOCK EXCHANGES- SEBI, RBI
What is SEBI
SEBI stands for Securities and Exchange Board of India. It is a statutory regulatory body
that was established by the Government of India in 1992 for protecting the interests of
investors investing in securities along with regulating the securities market. SEBI also
regulates how the stock market and mutual fund’s function.
Objectives of SEBI
Following are some of the objectives of the SEBI:
1. Investor Protection: This is one of the most important objectives of setting up SEBI. It
involves protecting the interests of investors by providing guidance and ensuring that the
investment done is safe.
2. Preventing the fraudulent practices and malpractices which are related to trading and
regulation of the activities of the stock exchange
3. To develop a code of conduct for the financial intermediaries such as underwriters,

brokers, etc.
4. To maintain a balance between statutory regulations and self regulation.
Functions of SEBI: -
SEBI has the following functions
1. Protective Function
2. Regulatory Function
3. Development Function
The following functions will be discussed in detail
1.Protective Function: The protective function implies the role that SEBI plays in
protecting the investor interest and also that of other financial participants. The
protective function includes the following activities.
a. Prohibits insider trading: Insider trading is the act of buying or selling of the securities
by the insiders of a company, which includes the directors, employees and promoters. To
prevent such trading SEBI has barred the companies to purchase their own shares from
the secondary market.

b. Check price rigging: Price rigging is the act of causing unnatural fluctuations in the price
of securities by either increasing or decreasing the market price of the stocks that leads
to unexpected losses for the investors. SEBI maintains strict watch in order to prevent
such malpractices.
c. Promoting fair practices: SEBI promotes fair trade practice and works towards
prohibiting fraudulent activities related to trading of securities.
d. Financial education provider: SEBI educates the investors by conducting online and
offline sessions that provide information related to market insights and also on money
management.
2.Regulatory Function: Regulatory functions involve establishment of rules and

regulations for the financial intermediaries along with corporates that helps in efficient
management of the market.
The following are some of the regulatory functions.
a. SEBI has defined the rules and regulations and formed guidelines and code of conduct
that should be followed by the corporates as well as the financial intermediaries.
b. Regulating the process of taking over of a company.
c. Conducting inquiries and audit of stock exchanges.

d. Regulates the working of stock brokers, merchant brokers.
3.Developmental Function: Developmental function refers to the steps taken by SEBI

in order to provide the investors with a knowledge of the trading and market function.
The following activities are included as part of developmental function.
1. Training of intermediaries who are a part of the security market.
2. Introduction of trading through electronic means or through the internet by the help of
registered stock brokers.
3. By making the underwriting an optional system in order to reduce cost of issue.
Purpose of SEBI: -
The purpose for which SEBI was setup was to provide an environment that paves the way
for mobilisation and allocation of resources. It provides practices, framework and
infrastructure to meet the growing demand.
It meets the needs of the following groups:
1. Issuer: For issuers, SEBI provides a marketplace that can utilised for raising funds.

2. Investors: It provides protection and supply of accurate information that is maintained

on a regular basis.
3. Intermediaries: It provides a competitive market for the intermediaries by arranging for

proper infrastructure.
Structure of SEBI
SEBI board comprises nine members. The Board consists of the following members.
1. One Chairman of the board who is appointed by the Central Government of India
2. One Board member who is appointed by the Central Bank, that is, the RBI
3. Two Board members who are hailing from the Union Ministry of Finance
4. Five Board members who are elected by the Central Government of India
Functions of RBI (Reserve Bank of India) | Finance &

Management
The central bank of India, RBI is also regarded as a bank of banks owing to the
functions of RBI. It was established on April 1, 1935, under the Reserve Bank of
India Act, 1934. In the beginning, the headquarters of RBI was established in
Calcutta. However, soon after, in 1937, it was permanently shifted to Mumbai.
As of October 2021, the Governor of the Reserve Bank of India is Mr Shaktikanta

Das. He is the 25 th RBI Governor and all the RBI functions are supervised by him.
Interesting Facts About Reserve Bank of India (RBI)

• The first Governor of RBI was Osborne Smith,
• The first Indian governor of RBI was C D Deshmukh.
• Originally, the Reserve Bank of India was privately owned; and was
established as a private bank with two extra functions: the regulation and
control of all banks in India, and to be the banker to the then government.
• Since its nationalization in 1949, RBI has been wholly owned by the
Government of India and thus, some new roles were added to the list of
functions of RBI!
Now, let us look at some of the important functions of RBI.

Important Functions of RBI (Reserve Bank of India): -

Being a central bank of India, RBI serves a critical role in regulating the financial
transactions in the country. Some of the important functions of RBI are listed
below:
• Issue of Bank Notes
• Banker to the Government
• Custodian of the Cash Reserves of Commercial Banks
• Custodian of country’s forex reserves

• Lender of last resort
• Controller of credit
Now let us discuss these RBI functions in detail:
1.The Issuer of Bank Notes

The most important function of RBI is the issuance of currency notes and coins,
except the one rupee note and coin which are issued by the Ministry of Finance.
All other notes bear the signature of the RBI Governor. However, the agency of
distribution of all notes and coins issued by the Government of India is the
Reserve Bank of India.
2.Banker to the Government

Another chief function of RBI is that it takes care of the banking needs of the
government, which includes maintaining & operating the deposit accounts of the
government, collecting the receipts of funds, and making payments on behalf of
the Government of India. It also represents the Indian Government, as a membe r
of the International Monetary Fund and the World Bank.
3.Custodian of Cash Reserves of Commercial Banks

Commercial banks are required to maintain the cash reserves at a rate decided
by the RBI in its monetary policy.
4.Custodian of Foreign Exchange Reserve

Another of the important functions of RBI is maintaining a reserve of foreign
currencies that enables the RBI to deal with any crisis situation.

5.Lender of the Last Resort

Often regarded as the banker of banks, the RBI acts as a parent to all commercia l
banks in India. Thus, it becomes the lender of the last resort for all banks when
they are in a crisis situation. RBI helps them by lending money, although at
higher RoI, to sail through the tide of financial difficulties.
6.Controller of Credit
RBI controls the credit created by the commercial banks in India, in accordance
with the economic priorities of the government of India. RBI uses quantitative
and qualitative methods to control and regulate the flow of money in the market.
These are implemented by announcing monetary policies at regular intervals.
The monetary policy involves the management of interest rates and money
supply. The central bank of India tweaks the money supply to achieve objectives
such as liquidity, inflation, and consumption.
References: -
House, 2008.

LECTURE NO: - 16
DCA, BSF TERMINOLOGY
DEPARTMENT OF COMPANY/CORPORATE AFFAIRS (DCA) AND BANKING

FINANCIAL SYSTEM: -
The Ministry is primarily concerned with administration of the Companies Act 2013, the
Companies Act 1956, the Limited Liability Partnership Act, 2008 & other allied Acts and
rules & regulations framed there-under mainly for regulating the functioning of the
corporate sector in accordance with law.
The Ministry is also responsible for administering the Competition Act, 2002 to prevent
practices having adverse effect on competition, to promote and sustain competition in
markets, to protect the interests of consumers through the commission set up under the
Act.
Besides, it exercises supervision over the three professional bodies, namely, Institute of
Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and
the Institute of Cost Accountants of India (ICAI) which are constituted under three
separate Acts of the Parliament for proper and orderly growth of the professions
concerned.
The Ministry also has the responsibility of carrying out the functions of the Central
Government relating to administration of Partnership Act, 1932, the Companies
(Donations to National Funds) Act, 1951 and Societies Registration Act, 1980.
Functions of ministry of corporate affairs are as follows: -
1 - Administration of the notified provisions of the companies act 2013 and those provisions of
the companies act 1956 that are still in force.
2 - Formulations of various rules and regulations under various acts administered by the
ministry.
3 - Convergence of Indian accounting standards with international financial reporting
standards.
4 - Management of the cadre of the Indian corporate law service.

Ministry of Corporate Affairs

The Ministry of Corporate Affairs (MCA) is vested with the powers of regulating the
corporate affairs in India through the Companies Act of 1956, Companies Act, 2013, and
other allied Acts. This article looks at the various functions of the regulatory body and the
services provided by it.
Primary Responsibilities
Apart from the regulation of corporate affairs, the Ministry is involved in:
• Administering the Competition Act of 2002 to prevent practices that adversely

affect competition, promote and sustain competition in markets, and to safeguard
consumer interests through the Commission established under the Act.
• Supervising the three professional bodies, namely the Institute of Chartered
Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI), and the
Institute of Cost Accountants of India (ICAI), established under the different Acts of
Parliament.
• Executing the functions of the Central Government with respect to the
administration of Partnership Act, 1932, the Companies (Donations to National
Funds) Act, 1951 and the Societies Registration Act, 1980.
Components of Indian Financial System

There are four main components of the Indian Financial System. This includes:
1. Financial Institutions
2. Financial Assets
3. Financial Services
4. Financial Markets
Let’s discuss each component of the system in detail.
1. Financial Institutions
The Financial Institutions act as a mediator between the investor and the borrower. The
investor’s savings are mobilised either directly or indirectly via the Financial Markets.
The main functions of the Financial Institutions are as follows:

• A short-term liability can be converted into a long-term investment

• It helps in conversion of a risky investment into a risk-free investment
• Also acts as a medium of convenience denomination, which means, it can match a
small deposit with large loans and a large deposit with small loans
The best example of a Financial Institution is a Bank. People with surplus amounts of
money make savings in their accounts, and people in dire need of money take loans. The
bank acts as an intermediate between the two.
The financial institutions can further be divided into two types:
• Banking Institutions or Depository Institutions – This includes banks and other

credit unions which collect money from the public against interest provided on the
deposits made and lend that money to the ones in need
• Non-Banking Institutions or Non-Depository Institutions – Insurance, mutual
funds and brokerage companies fall under this category. They cannot ask for
monetary deposits but sell financial products to their customers.
Further, Financial Institutions can be classified into three categories:
• Regulatory – Institutes that regulate the financial markets like RBI, IRDA, SEBI, etc.
• Intermediates – Commercial banks which provide loans and other financial
assistance such as SBI, BOB, PNB, etc.
• Non-Intermediates – Institutions that provide financial aid to corporate
customers. It includes NABARD, SIBDI, etc.
2. Financial Assets
The products which are traded in the Financial Markets are called Financial Assets. Based
on the different requirements and needs of the credit seeker, the securities in the market
also differ from each other.
Some important Financial Assets have been discussed briefly below:
• Call Money – When a loan is granted for one day and is repaid on the second day, it
is called call money. No collateral securities are required for this kind of transaction.
• Notice Money – When a loan is granted for more than a day and for less than 14
days, it is called notice money. No collateral securities are required for this kind of
transaction.
• Term Money – When the maturity period of a deposit is beyond 14 days, it is called
term money.

• Treasury Bills – Also known as T-Bills, these are Government bonds or debt
securities with maturity of less than a year. Buying a T-Bill means lending money to
the Government.
• Certificate of Deposits – It is a dematerialised form (Electronically generated) for
funds deposited in the bank for a specific period of time.
• Commercial Paper – It is an unsecured short-term debt instrument issued by
corporations.
3. Financial Services
Services provided by Asset Management and Liability Management Companies. They help
to get the required funds and also make sure that they are efficiently invested.
The financial services in India include:
• Banking Services – Any small or big service provided by banks like granting a loan,
depositing money, issuing debit/credit cards, opening accounts, etc.
• Insurance Services – Services like issuing of insurance, selling policies, insurance
undertaking and brokerages, etc. are all a part of the Insurance services
• Investment Services – It mostly includes asset management
• Foreign Exchange Services – Exchange of currency, foreign exchange, etc. are a
part of the foreign exchange services
The main aim of the financial services is to assist a person with selling, borrowing or
purchasing securities, allowing payments and settlements and lending and investing.
4. Financial Markets
The marketplace where buyers and sellers interact with each other and participate in the
trading of money, bonds, shares and other assets is called a financial market.
The financial market can be further divided into four types:
• Capital Market – Designed to finance the long-term investment, the Capital market
deals with transactions which are taking place in the market for over a year. The capital
market can further be divided into three types:
(a) Corporate Securities Market
(b) Government Securities Market

(c) Long Term Loan Market

• Money Market – Mostly dominated by Government, Banks and other Large

Institutions, the type of market is authorised for small-term investments only. It is a
wholesale debt market which works on low-risk and highly liquid instruments. The
money market can further be divided into two types:
(a) Organised Money Market
(b) Unorganised Money Market
• Foreign exchange Market – One of the most developed markets across the world,
the foreign exchange market, deals with the requirements related to multi-currency.
The transfer of funds in this market takes place based on the foreign currency rate.
• Credit Market – A market where short-term and long-term loans are granted to
individuals or Organisations by various banks and Financial and Non-Financial
Institutions is called Credit Market
References: -
2008.
House, 2008

LECTURE NO: - 17
VALUATION OF SECURITIES
Security valuation is important to decide on the portfolio of an investor. All investment

decisions are to be made on a scientific analysis of the right price of a share. Hence, an
understanding of the valuation of securities is essential. Investors should buy underpriced
shares and sell overpriced shares. Share pricing is thus an important aspect of trading.
Conceptually, four types of valuation models are discernible.
They are:
(i) Book value,

(ii) Liquidating value,
(i) Intrinsic value,
(ii) Replacement value as compared to market price
(i) Book Value:
Book value of a security is an accounting concept. The book value of an equity share is
equal to the net worth of the firm divided by the number of equity shares, where the net
worth is equal to equity capital plus free reserves. The market value may fluctuate around
the book value but may be higher if the future prospects are good.
(ii) Liquidating Value (Breakdown Value):
If the assets are valued at their breakdown value in the market and take net fixed assets
plus current assets minus current liabilities as if the company is liquidated, then divide this
by the number of shares, the resultant value is the liquidating value per share. This is also
an accounting concept.
(iii) Intrinsic Value:
Market value of a security is the price at which the security is traded in the market and it
is generally hovering around its intrinsic value. There are different schools of thought
regarding the relationship of intrinsic value to the market price. Market prices are those
which rule in the market, resulting from the demand and supply forces. Intrinsic price is
the true value of the share, which depends on its earning capacity and its true worth.
According to the fundamentalist approach to security valuation, the value of the security
must be equal to the discounted value of the future income stream. The investor buys the
securities when the market price is below this value.
(iv) Replacement Value:

When the company is liquidated and its assets are to be replaced by new ones, their prices
being higher, the replacement value of a share will be different from the Breakdown
value. Some analysts take this replacement value to compare with the market price.
Reference: -

LECTURE NO: - 18
Trading Mechanism, Investor Protection and Valuation of Securities
Stock Market & Trading Mechanism in Stock Exchange
Participants in the Stock Market:

Buyers and sellers are the essential constituent of any type of market, but the Stock
Market is a bit different. Of-course buyers and sellers exist here as well, but there are
various other entities involved here too. Let us discuss about all the participants of the
stock market in detail.
• Securities and Exchange Board of India (SEBI): SEBI is the main regulatory body
which keeps an eye on the functioning of the stock markets in India. It is a government
body and is responsible for laying down all the necessary framework and regulations
required for the smooth and fair functioning of the markets. All the other bodies in
the market have to comply with SEBI and abide all the regulations to protect the
investor’s interest.
• Stock Exchanges: All the trading in the stock market is facilitated by the stock
exchanges. It is the main intermediary body which connects buyers and sellers. The
two most prominent stock exchanges in India are the National Stock Exchange (NSE)
and Bombay Stock Exchange (BSE). However, you cannot directly approach a stock
exchange for trading.
• Broking Houses: These are the bodies which help investors trade on the exchanges.
To trade on any of the nationalized stock exchange you need to take the help of a
stockbroker. A broker needs to be registered with SEBI in order to trade on the
exchange. The broker charges brokerage from you for every trade that you place on
the exchange.
• Traders and Investors: These are the most important constituents of the stock
market. These are the individuals who invest in the stocks or other assets with the
aim of extracting profits. You can trade or invest on any of the stock exchange by
opening a Demat account.
2. Trading Mechanism in Stock Exchange

Once you have your Demat account and Trading account ready, you are all set to trade in
the stock market. Companies list their shares in the Primary Market through an Initial
Public Offering Or IPO. After the IPO the stocks of the company are listed on an exchange
and are available for trading in the secondary market.

Stocks of companies are traded in order to make profits or cut down losses. This trading
of stocks is carried out through a stockbroker or brokerage firm. These brokers act as an
intermediary body between you and the stock exchange.
Whenever you want to buy and trade a stock, you place the order with your broker at a
fixed price. The broker passes on the order to the stock exchange. The exchange then
searches for availability of buyer or seller to execute the order at the instructed price. If
the order is completed the exchange communicated with the broker that the order has
been executed.
Trading Mechanisms
Trading mechanisms refer to the logistics behind trading assets and securities, regardless
of the type of market. These markets can be exchanges, dealers or OTC markets. The
mechanisms are the operations by which buyers of an asset are matched with sellers.
There are two main types of trading mechanisms:
• Order driven markets

• Quote driven markets
Trading Mechanisms: Quote Driven
In a quote driven market, continuous prices or “quotes” are provided to buyers and
sellers. These prices are provided by market makers, which mean these types of systems
are better suited for dealer or OTC markets. For a buyer, the price provided is the price a
dealer is willing to sell at. For a seller, the price provided is the price a dealer is willing to
buy at. Typically, the quoted buy price will be lower than the sell price. The spread is
the profit that the market maker, the dealer, makes.

Trading Mechanisms: Order Driven
In an order driven market, buyers and sellers of assets are able to place orders for assets
they wish to purchase or sell. They can list at market price, which executes a market order
instantaneously at the best available price. Alternatively, they can list a fixed/limit price,
which executes either a limit or stop order, not to be executed until certain pricing
conditions are met.
In an order driven market, counterparties are not necessarily available immediately,

depending on the listed price. Because this is so, order driven trading mechanisms are
more suited for exchanges. Orders will execute once a suitable counterparty is found for
each buyer or seller. In other words, a buy order will only execute if a seller is found who
is willing to sell at the specified limit price.
Order driven trading mechanisms are often supported by an order book.
Order Book
An order book is the system or database that operates behind an order driven trading
mechanism. The book lists all buyers and sellers, as well as their intended bid or ask prices.
In the above shown order book, we see sell orders listed in ascending order and buy orders
listed in descending order, sorted by list price. Orders in an order driven trading
mechanism execute when the lowest sell order and the highest buy order match, or
exceed each other. In the case of the Ethereum order book above (courtesy of CEX.io), no
order will execute as the lowest sell order price is higher than the highest buy order price.

Reference: -
• https://www.thebalance.com/securities-definition-and-effect-on-the-us-economy-
3305961.

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MBA 3rd Sem.

Unit-2 Security Analysis and portfolio Management (SAPM)

INTRODUCTION TO INDIAN FINANCIAL MARKET

What are Financial Markets?

Dr. Pramod Gupta, Professor-MBA Department-MITRC 33

What is the International Finance System?

The study of monetary interactions between two or more countries is known as

What are the Types of Financial Markets in India?

1.Markets for Bonds: -

Dr. Pramod Gupta, Professor-MBA Department-MITRC 34

2.Markets for Money: -

A subordinate is a contract between at least two parties whose value is determined by a

5.Foreign Exchange Market or Forex Market: -

Dr. Pramod Gupta, Professor-MBA Department-MITRC 35

What are Financial Instruments in India? :-

B. Instruments that are derivatives: -

Dr. Pramod Gupta, Professor-MBA Department-MITRC 36

ORGANIZATION AND FUNCTIONING OF SECURITIES MARKET

Introduction to Securities Market

Dr. Pramod Gupta, Professor-MBA Department-MITRC 37

Key Characteristics of Securities: -

• Securities can be issued by borrowers / equity funders to raise money at a reasonable

Security Markets: Structure and Participants

Let us now turn to the key participants in the securities market

Dr. Pramod Gupta, Professor-MBA Department-MITRC 38

Key Intermediaries in the Securities Market: -

Dr. Pramod Gupta, Professor-MBA Department-MITRC 39

• Custodians are to institutional investors what the DP is to retail investors. Custodians

• Investment advisers help investors to make an informed choice of securities in a manner

Regulatory Framework For The Securities Market

• Ministry of Finance (MOF) regulates markets through the Department of Economic

Detailed Functions of SEBI: -

• It oversees functioning of primary (IPO) markets. This includes general conditions

• Inspections of the intermediaries to ensure compliance with prescribed standards.

Major Functions of The Securities Market: -

Dr. Pramod Gupta, Professor-MBA Department-MITRC 41

Securities Types and Characteristics: -

Dr. Pramod Gupta, Professor-MBA Department-MITRC 42

TYPES OF MARKET, STOCK INDICES

What is Share Market?

Types of Share Markets: -

• Primary Share Markets

What Is Traded on The Share Market?

Dr. Pramod Gupta, Professor-MBA Department-MITRC 43

Dr. Pramod Gupta, Professor-MBA Department-MITRC 44

What Is Stock Market Index/Indices? -

Stock Market Index Meaning: -

What Are the Types of Stock Market Indices?

• Benchmark indices such as BSE Sensex and NSE Nifty

S&P BSE Sensex:

Dr. Pramod Gupta, Professor-MBA Department-MITRC 45

CNX NIFTY (NIFTY 50):

Why Are Stock Market Indices Required?

1.Provide Important Information for Benchmarking:

2.Help Minimize Your Exposure to Risk:

3.Help Passive Investors:

Dr. Pramod Gupta, Professor-MBA Department-MITRC 46

REGULATORY ENVIRONMENT- STOCK EXCHANGE IN INDIA

The Division administers legislations and rules made under the

Functions of Stock Exchange: -

1. Role of an Economic Barometer: Stock exchange serves as an economic barometer

Dr. Pramod Gupta, Professor-MBA Department-MITRC 47

4. Contributor to Economic Growth: Stock exchange offers a platform for trading of